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You are given the following information relating to ABV Co
You are given the following information relating to ABV Co., a merchandising company:
Gross profit base on sales 20% Accounts receivable, Dec. 31, 2019 P 80.000 Collections on accounts receivable in 2020 P 430,000 Cost of goods available for sale in 2020 P 460.000 Merchandise inventory. Dec. 31, 2020 P 100.000
Assuming all sales were on account, what was the company's Accounts Receivable balance on Dec 31. 2020? (1 Point)
• P 100,000 • P 50,000 • P 120,000 O P 90,000
Expert Solution
| Schedule of Account Receivable | |
| Description | Amount |
| Accounts Receivables, December 31, 2019 | 80,000 |
| Sales for the Current Year | 450,000 |
| Total Balance | 530,000 |
| Less: Collection on Account Receivable in 2020 | 430,000 |
| Balance at the end of current year | 100,000 |
Workings:
Cost of Goods sold = Cost of goods available for sale - Merchandise inventory on 31st December 2020
= 460,000 - 100,000
Cost of Goods sold = P 360,000
As gross profit on Sale is 20%. Hence, Value of Cost of goods sold is 80% of sale.
Total Sales = Cost of Goods Sold * 100/80
= 360,000 * 100/80
Total Sales = P450,000
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